U.S. Department of Labor Raises Salary Threshold for Wage and Hour Exemptions
The U.S. Department of Labor (“DOL”) announced its final overtime rule which updates the earnings thresholds necessary to exempt executive, administrative, or professional employees (“white collar exemptions”) from the Fair Labor Standards Act’s (“FLSA”) minimum wage and overtime pay requirements.FN1 The duties test for white collar exemptions remain unchanged. The DOL’s final rule, which takes effect on January 1, 2020, includes the following changes:
The standard salary threshold to qualify as “exempt” is increased from $455.00 to $684.00 per week, or $35,568.00 per year;
The total annual compensation requirement for “highly compensated employees” increased from $100,000.00 to $107,432.00 per year; and
To satisfy the standard salary threshold, employers are permitted to treat nondiscretionary bonuses and incentive payments (like commissions) paid at least once per year, as up to ten percent of a worker’s salary.
Employers have less than 100 days to ensure compliance with the DOL’s new rule, and at this time should:
Identify which of its currently-exempt employees earn under $35,568.00 annually and determine whether to reclassify such employees or bump their pay to maintain exempt status; and
If employers decide to re-classify formerly exempt employees as non-exempt, develop a training plan to ensure such employees properly track their time to comply with overtime rules.
Employers are also encouraged to contact one of Campbell Litigation’s attorneys for questions on the new rule or whether employees’ responsibilities qualify them as exempt (assuming their salary level is sufficiently high).
FN1 See Department of Labor’s Wage and Hour Division’s September 24, 2019 Press Release, https://www.dol.gov/newsroom/releases/whd/whd20190924. See also Vin Gurrieri, Employers Face Time Crunch As New OT Rule Looms, Law360 (September 25, 2019), https://www.law360.com/employment/articles/1202771/employers-face-time-crunch-as-new-ot-rule-looms.